Alpha announces restructuring, layoffs

CHARLESTON, W.Va. -- Touting a plan to "reshape its portfolio of operations," Alpha Natural Resources on Tuesday announced it was immediately closing eight mines in three states, and narrowing its focus to a smaller domestic electrical power plant market and the potential for growth in exporting steel-making coal.

Alpha said its moves are aimed at slashing annual production by about 15 percent, cutting $150 million in overhead and eliminating about 1,200 of the company's 13,100 jobs by early next year.

The Bristol, Va.-based company said the cutbacks would be made by closing some entire mines, idling certain production equipment at other operations, and through "mining out reserves" expected to occur at other sites by early 2013.

Tuesday's mine closures involved 400 employees, but Alpha spokesman Ted Pile said that about 270 of the affected workers would be offered jobs within the company, through a combination of filling vacancies and replacing outside contractors. In West Virginia, the mines affected are the Alloy deep mine near Powellton, the Alloy surface mine near Boomer, the Premium highwall mine near Gilbert and the White Flame surface mine near Wharncliffe, Pile said.

Overall, half of the company's planned production cuts will come from mines in Wyoming's Powder River Basin, 40 percent from eastern steam coal mines "that are unlikely to be competitive for the foreseeable future," and the rest from lower-quality metallurgical mines, Alpha said.

"We're taking a long-term view of the thermal market, and we believe there are solid opportunities for diversified suppliers like Alpha to produce and sell thermal coal profitably into a smaller domestic market and to customers in new markets overseas," Alpha CEO Kevin Crutchfield said in a statement. "At the same time, we have a big opportunity to advance Alpha's position as a premier supplier of metallurgical coal."

The Alpha moves are another blow to the Appalachian coal industry, which is struggling in the face of cheap natural gas, competition from other coal basins, declining reserves of quality coal, and the finalization of long-mandated reductions in toxic air pollution from coal-fired power plants.

While coal company officials and regional politicians have blamed the industry's problems on the Obama administration, the number of miners working in Appalachia actually rose during the first three years of the administration.

But a string of layoffs has come since the first of the year, and coal-mining employment in West Virginia dropped by about 1,300 jobs in the second quarter of the 2012, according to data from the U.S. Mine Safety and Health Administration. MSHA data showed about 23,300 mine workers during the period from April to June, a decline of about 5 percent over the previous three months.

Earlier this year, the U.S. Department of Energy projected that annual Central Appalachian Coal production -- mostly consisting of Southern West Virginia and Eastern Kentucky -- would be cut in half by 2035. And, during the first quarter of 2012, coal's share of U.S. electricity generation dropped to 36 percent, far below the 50 percent still frequently cited by industry supporters.

In Tuesday's announcement, Alpha officials focused on how they believe their "strategic repositioning plan" would "meet the evolving demands of a changing global coal market."

"The focus and shape of our company need to change to reflect our new business environment," said Paul Vining, Alpha's president. "We must have a nimble operating model, superior cost management and an overhead structure that matches our streamlined operational footprint.

"We recognize these changes will impact our people, suppliers and communities in some areas where we operate," Vining said. "Alpha is committed to acting transparently and responsibly throughout the transition with respectful consideration of our people and all other stakeholders."

Despite what it called a "current market softness" for steel-making, or metallurgical coal, Alpha said new mills are being planned or are under construction in developing areas of Asia, South America and elsewhere that provide long-term growth opportunities.

"As the third-largest supplier of metallurgical coal globally, Alpha has 25-30 million tons of export capacity through the East Coast and Gulf of Mexico which is partially untapped, giving Alpha the capability to scale up exports swiftly," the company said.

Regarding steam coal, used to make electricity, Alpha said its focus is on operations with "competitive cost positions" and "more stable customer demand -- such as supplying base-load power plants and generating units that will survive a stricter regulatory regime."

Last year, Alpha produced about 106 million tons of coal, split about evenly between eastern and western mines, according to corporate disclosures. Metallurgical mines, located exclusively in the east, accounted for just 18 percent of Alpha's total production in 2011, but half of the company's revenues, company report show.